Ebook The Japanese Asset Management Industry: Implications For Fostering Asset Management And Capital Markets In Asia
Asset management is currently at a very promising stage in Asia. There has been a marked development in recent years, with individual countries progressing at different speeds. For example, China has witnessed rapid growth since 2000, whereas Malaysia, whose framework has been in place since 1959, has only experienced a rapid maturity of its markets in recent years.
What is most noteworthy is that all these recent development have been largely market-led. There have been a number of efforts by government toward tighter legislation and the creation of a more favorable investment environment, but much has come from investors and managers realizing the potential for returns. Of course, it is difficult to say that any development could be fully autonomous. The major factor behind an improving investment environment has been economic growth among the ASEAN nations and a commitment to reform in the wake of the AFC.
This paper brings to light the development of Japan’s asset management industry (Chapters 1 & 2), highlighting milestones, lessons, and areas of vulnerability and reforms, which other expanding Asian economies could study and adapt in the process of helping nurture towards maturity their own AMI. The experiences of Europe and the US (Chapter 3), especially in comparison to Japan, draws attention to the weight of having well functioning legal regulatory frameworks and underscores the essentials of transparency and aiming for high standards of disclosure.
The major drive for market-oriented development is coming from the proliferation of new financial products on the market, which allows individuals to better find products that suit their own risk-return parameters. In closely matching their ideal balance, individuals will derive a greater utility out of investment trusts and as such, funds will flow into the market. This in turn will have secondary effects, as markets will become more liquid and less risky. Combined with better stock markets, economic growth and an overall improvement in the investment environment, the investment trust business is poised to experience marked growth. Furthermore, from a marketing perspective, increased availability of investment instruments will create a perception amongst investors that investment trusts are a normal constituent of any household’s portfolio. This will foster an investment environment far more predisposed toward asset management and in turn, the market will be the driver for investor education.
It is crucial that in developing solid markets for financial products, investors understand, to a sufficient level, the good that they are buying. In doing so, they are able to make judgments about quality and investment performance, facilitating the survival and proliferation of high performance funds, which will have externalities on investor confidence in future investment trust markets. We are currently experiencing a shift of this kind in Japan. However, Asia as a whole still has a very low penetration rate into the investment trust industry, with few investment trusts currently being offered on the market. There is a lack of both sufficient products and distribution channels.
In terms of aggressively promoting new products and develop suitable markets, this report seeks to identify what policy is required, based on empirical evidence (Chapter 4). There is a detailed discussion regarding disclosure to investors, the required legislation and concerns over investor protection. As with any major market reform (involving an overhaul of the legal system, strengthening distribution networks, offering tax incentives, streamlining system of fees and commission), these developments will take time, but arguably now is the correct juncture to implement major structural changes, essentially due to the fact that economic growth in the ASEAN nations, along with Japan, China and Korea should be fully harnessed as a catalyst for stock market improvement, investor involvement and ultimately the development of the asset management industry (Chapter 5).
CONTENTS
List of tables, Figures and Charts
Executive summary
Introduction Chapter 1 Asset management industry in Japan
- 1.1 Reinforcing the market economies in Asia with an asset management structure
1.2 The present state of the Japanese asset management business
1.3 The purpose of the asset management industry
1.4 A comparison between investment trust companies and investment advisory companies
1.5 Some issues confronting the Japanese asset management industry
Chapter 2 Collective investment business in Japan
- 2.1 Overview of the investment trusts business in Japan
2.1.1 Defining investment trusts
2.1.2 Classification of investment trust funds
- 2.2 Publicly offered securities investment trusts
2.2.1 Classification
2.2.2 Investment management of publicly offered securities investment trusts
2.2.3 Quantitative investment limits
2.2.4 Calculation of net asset value per share
- 2.3 Fees and expenses of securities investment trusts
2.3.1 Fees paid directly by investors
2.3.2 Fees borne by the fund and deducted from its assets
- 2.4 A brief history of investment trusts in Japan
2.5 Growth and development of securities investment trusts
2.6 Late financial big bang and investment trust business
2.7 The current situation of mutual fund investment
2.8 Individual consumers and securities investment
2.9 An evaluation of some salient aspects of the collective investment business in Japan1
2.9.1 Causes of the limited growth of investment trusts
2.9.2 Measures to stimulate interest in investment trusts
2.9.3 Coping with problems on operations procedures
2.9.4 Possible contribution of investment trusts to pension schemes
Chapter 3 The asset management industry in Europe and the USA
- 3.1 The asset management industry in Europe
3.2 The asset management industry in the US
3.2.1 Regulatory Infringement and Demand for Reform
3.2.2 Movement Toward Reform
Chapter 4 The empirical analysis on mutual fund and investment trust markets in the U.S and Japan
- 4.1 Intuitive analysis on savings market from macroeconomics view
4.2 Empirical study on the determinants of mutual funds and investment trusts demand
Chapter 5. The asset management industry in select Asian countries
- 5.1 The state of the asset management industries in China, Indonesia, Malaysia, the Philippines and Thailand1
5.1.1 History and growth of investment funds
5.1.2 Market penetration
5.1.3 Industry players
5.1.4 Distribution channels
- 5.2 The major impediments to the development of the asset management industry
5.2.1 Poor regulation
5.2.2 High taxes
5.2.3 Excessive fees and charges
5.2.4 Limited distribution channels
5.2.5 Lack of investor education and interest
5.2.6 Limited investment outlets
5.3 Policy recommendations for the development of the asset management industry
List of authors
LIST of TABLES, FIGURES and CHARTS
IN CHAPTER 1:
1-1 Householders Financial Assets Within Leading Countries 2004
1-2 Investment Advisory Contracts in Japan
1-3 Comparison of the Outstanding Investment Trust Balances in Leading Countries
1-4 Comparison of Japanese Investment Trusts and Investment Advisory
IN CHAPTER 2:
2-1 Types of Funds
2-2 Investment Trusts Managed by Investment Trust Company
2-3 Investment Trusts Managed by Trustee
2-4 Types of Indices of the ETF
2-5 Balance of Investment Trust in the Top 10 Trust Holding Countries
2-6 Changes in the Net Asset Balance of Publicly Offered securities Investment Trusts
2-7 Net Asset Balances of Contractual Form of Publicly Offered Investment Trusts
2-8 Balance of Net Asset Balance and the Number of Deals of Privately Offered Securities Investment Trust
2-?Selection Criteria for Savings
2-10 Reasons for not Buying Investment Trusts
IN CHAPTER 4:
4-1 Disposable Income, Savings and Savings Rate in the US
4-2 Scatter Plot of Personal Savings and Disposable Income in the US
4-3 Personal Savings Rate and Total Net Assets of Mutual Funds in the US
4-4 Disposable Income, Savings and Savings Rate in Japan
4-5 Scatter Plot of Personal Disposable Income and Personal Savings in Japan
4-6 Personal Savings Rate and Total Net Assets of Investment Trusts in Japan
4-7 Cash Flows into Stock, Bond and Hybrid Funds
4-8 Net Assets of Mutual Funds
4-9 Stock Market Performance and Net Cash Flow into Stock Funds
4-10 Net Assets of Taxable Bond Fund and Market Performance (US Data)
4-11 Cash Inflow and Volatility
4-12 Net Assets of Hybrid Funds and Volatility
4-13 Net Cash Flow of Investment Trusts in Japan
4-14 Net Assets of Investment Trusts (Japanese Data)
4-15 TOPIX and Total Assets of Stock Investment Trusts
4-16 TOPIX and Bond Investment Trust Assets
4-17 Cash Flow of Investment Trust Market and TOPIX
4-18 Volatility of TOPIX and Net Cash Flow of Hybrid Investment Trusts
4-19 JGB Yield and Net Cash Flow of Bond Investment Trusts
4-20 The Number of Investment Trusts Provided to Market
4-21 Test Statistics of ADF Test for US Data
4-22 Test Statistics of ADF Test for US Data
4-23 Perron’s Test Statistics for Japanese Data
4-24 The Estimation Results for Demand of Mutual Finds in the US
4-25 The Estimation Results for Demand of Investment Trusts in Japan
IN CHAPTER 5:
5-1 Growth in Net Assets of Investment Funds Page 9
5-2 Investment Funds Key Indicators
5-3 Estimated Market Penetration of Investment Funds
5-4 Market Shares of Different Fund Types
5-5 Number of Asset Management Companies, Number of Funds and Assets Under Management
5-6 Taxation of Investment Funds and Investors
5-7 Fees and Expenses of General Equity and Bond Funds
5-8 Stock Markets
5-9 Bond Markets
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